Maggie Thatcher's Bull Markethttp://www.fool.com/investing/general/2011/10/02/maggie-thatchers-bull-market.aspx Selwyn Parker
October 2, 2011
This article has been adapted from our sister site across the pond, Fool U.K.
You'd be hard put to find an optimistic investor in 1980, so bad was the British economy. Inflation and interest rates were going through the roof, unemployment was rising, and gloom lay all about.
Yet two years later, the FTSE was off on a bull run that would last into the noughties. So what happened to turn the tide? As today's markets alternate between blind panic and irrational relief, it's a highly pertinent question.
Gloom and revulsion
It was the same story in America, which had suffered double-digit inflation and double-digit interest rates for years. Reflecting that revulsion, the Dow hit rock bottom at 776.2 in early 1982, almost exactly where it had been 18 years earlier. Meanwhile, the FTSE All-Share index was struggling around the 250 mark.
But then the headline numbers began to turn. By 1981 inflation had fallen to 12% in Britain and below 5% by January 1983. By then, the bull market was taking hold.
A boost from behind
Maggie's privatization program started from 1981 with the sale of half of Cable and Wireless. Thereafter, many of the jewels in the national crown -- 20% of the economy was in state hands -- were progressively opened up to investors. Because the privatizations were organized in a way that attracted the general public to buy shares in the companies, a whole new class of investors flooded into the stock markets. Cable and Wireless, for example, was oversubscribed by six times.